Question 1

In an increasing cost industry,an unexpected decrease in demand would lead to ____ costs and a ____ price in the long run?

Accepted Answer

A)  higher; higher. 
B)  higher; lower. 
C)  lower; lower. 
D)  lower; higher. 
A)  higher; higher. 
B)  higher; lower. 
C)  lower; lower. 
D)  lower; higher. C

Question 2

If the market demand curve in a perfectly competitive industry shifts left,the demand curve for each existing firm will:

Accepted Answer

A)  shift up. 
B)  shift down. 
C)  shift right. 
D)  shift left. 
A)  shift up. 
B)  shift down. 
C)  shift right. 
D)  shift left. B

Question 3

Which of the following is a characteristic of perfect competition?

Accepted Answer

A)  substantial barriers to entry 
B)  homogeneous products 
C)  few sellers 
D)  each firm has significant control over the market 
A)  substantial barriers to entry 
B)  homogeneous products 
C)  few sellers 
D)  each firm has significant control over the market B

Question 4

Exhibit 12-9   Refer to Exhibit 12-9.This pair of graphs demonstrates the chain of events for a lawn care firm,beginning with an increase in the market demand for lawn care services.Which of the following statements is incorrect?

Accepted Answer

A)  This particular firm increases its production of lawn care services in response to an increase in the price of lawn care services. 
B)  The overall quantity of lawn care services increases in the industry. 
C)  The equilibrium price of lawn care services is initially P0, then increases to P1 because of the increase in demand, and eventually decreases to P0 once again when the market supply of output increases as a result of new firms entering the industry. 
D)  The diagrams depict an increasing cost industry. 
A)  This particular firm increases its production of lawn care services in response to an increase in the price of lawn care services. 
B)  The overall quantity of lawn care services increases in the industry. 
C)  The equilibrium price of lawn care services is initially P0, then increases to P1 because of the increase in demand, and eventually decreases to P0 once again when the market supply of output increases as a result of new firms entering the industry. 
D)  The diagrams depict an increasing cost industry.

Question 5

Exhibit 12-3   Refer to Exhibit 12-3.Total revenue for the firm in Graph C equals:

Accepted Answer

A)  $120. 
B)  $150. 
C)  $600. 
D)  $720. 
A)  $120. 
B)  $150. 
C)  $600. 
D)  $720.

Question 6

A firm in a perfectly competitive industry will expand output as long as:

Accepted Answer

A)  marginal revenue is less than average revenue. 
B)  marginal cost is less than marginal revenue. 
C)  marginal cost is less than average total cost. 
D)  marginal revenue is less than average total cost. 
A)  marginal revenue is less than average revenue. 
B)  marginal cost is less than marginal revenue. 
C)  marginal cost is less than average total cost. 
D)  marginal revenue is less than average total cost.

Question 7

William is a wheat farmer and wheat sells in a perfectly competitive market,with an equilibrium price of $5 per bushel.Its marginal revenue:

Accepted Answer

A)  is greater than $5. 
B)  is $5. 
C)  is less than $5. 
D)  cannot be determined from the above information. 
A)  is greater than $5. 
B)  is $5. 
C)  is less than $5. 
D)  cannot be determined from the above information.

Question 8

A perfectly competitive firm is a:

Accepted Answer

A)  price giver. 
B)  price taker. 
C)  price maker. 
D)  price leader. 
A)  price giver. 
B)  price taker. 
C)  price maker. 
D)  price leader.

Question 9

Suppose losses cause industry Z to contract,and as a result,the prices of inputs used intensively in the industry's production process fall.We know,as a result,that industry Z is:

Accepted Answer

A)  an increasing cost industry. 
B)  a constant cost industry. 
C)  a decreasing cost industry. 
D)  experiencing diminishing returns. 
A)  an increasing cost industry. 
B)  a constant cost industry. 
C)  a decreasing cost industry. 
D)  experiencing diminishing returns.

Question 10

In the short run,if a perfectly competitive firm produced at the quantity of productive efficiency,would it generate the highest profit level possible? Why or why not?

Accepted Answer

In the short run,a firm producing with p

Question 11

In long-run equilibrium,a perfectly competitive firms produces at the output level at which:

Accepted Answer

A)  total revenue is maximized. 
B)  long-run marginal cost is minimized. 
C)  average total cost is minimized. 
D)  short-run variable cost is minimized. 
A)  total revenue is maximized. 
B)  long-run marginal cost is minimized. 
C)  average total cost is minimized. 
D)  short-run variable cost is minimized.

Question 12

If perfectly competitive industry B is currently realizing economic profits,we would expect that:

Accepted Answer

A)  industry output will fall, good B will fall in price, and economic profits will tend to disappear. 
B)  industry output will fall, good B will rise in price, and economic profits will tend to disappear. 
C)  industry output will rise, good B will fall in price, and economic profits will tend to disappear. 
D)  industry output will rise, good B will fall in price, and economic profits will tend to increase. 
A)  industry output will fall, good B will fall in price, and economic profits will tend to disappear. 
B)  industry output will fall, good B will rise in price, and economic profits will tend to disappear. 
C)  industry output will rise, good B will fall in price, and economic profits will tend to disappear. 
D)  industry output will rise, good B will fall in price, and economic profits will tend to increase.

Question 13

For a perfectly competitive firm,average revenue is:

Accepted Answer

A)  equal to marginal cost at all levels of output. 
B)  equal to marginal revenue at all levels of output. 
C)  equal to price at all levels of output. 
D)  characterized by both (b) and (c). 
A)  equal to marginal cost at all levels of output. 
B)  equal to marginal revenue at all levels of output. 
C)  equal to price at all levels of output. 
D)  characterized by both (b) and (c).

Question 14

Why can't a firm in a perfectly competitive industry charge a price above the market-clearing price?

Accepted Answer

A)  Government-imposed price ceilings prevent prices from being raised. 
B)  Firms in a perfectly competitive industry face significant barriers to entry. 
C)  Perfectly competitive firms are price searchers. 
D)  Numerous competitors produce the same product and charge the market price. 
A)  Government-imposed price ceilings prevent prices from being raised. 
B)  Firms in a perfectly competitive industry face significant barriers to entry. 
C)  Perfectly competitive firms are price searchers. 
D)  Numerous competitors produce the same product and charge the market price.

Question 15

The demand curve faced by a perfectly competitive firm is vertical.

Accepted Answer

A) True 
 B)False

Question 16

What is the maximum amount of profit the perfectly competitive firm depicted below could earn in the short run?

Accepted Answer

A)  $900 
B)  $1,120 
C)  $1,260 
D)  $2,000 
A)  $900 
B)  $1,120 
C)  $1,260 
D)  $2,000

Question 17

Which of the following statements is not characteristic of a perfectly competitive industry in long-run equilibrium?

Accepted Answer

A)  A profit-maximizing firm may produce any output level at which P < LRATC. 
B)  Every firm produces at an output level at which MC = LRATC. 
C)  Ceteris paribus, there is no tendency for firms to either enter or exit the industry. 
D)  No firm earns an economic profit. 
A)  A profit-maximizing firm may produce any output level at which P < LRATC. 
B)  Every firm produces at an output level at which MC = LRATC. 
C)  Ceteris paribus, there is no tendency for firms to either enter or exit the industry. 
D)  No firm earns an economic profit.

Question 18

The market demand curve in a perfectly competitive industry is horizontal,while the demand curve faced by an individual perfectly competitive firm is downward sloping.

Accepted Answer

A) True 
 B)False

Question 19

If the typical firm in a perfectly competitive market was depicted in the graph below,what would be most likely to occur?

Accepted Answer

A)  New firms would be likely to enter, increasing the market price. 
B)  New firms would be likely to enter, decreasing the market price. 
C)  Existing firms would be likely to exit, increasing the market price. 
D)  Firm would neither enter nor exit and the market price would remain unchanged. 
A)  New firms would be likely to enter, increasing the market price. 
B)  New firms would be likely to enter, decreasing the market price. 
C)  Existing firms would be likely to exit, increasing the market price. 
D)  Firm would neither enter nor exit and the market price would remain unchanged.

Question 20

Exhibit 12-3   Refer to Exhibit 12-3.If the market price decreased to $4.70 in Graph B,this firm should:

Accepted Answer

A)  immediately shut down if price is greater than average variable cost. 
B)  increase output. 
C)  decrease output. 
D)  continue producing the same level of output. 
A)  immediately shut down if price is greater than average variable cost. 
B)  increase output. 
C)  decrease output. 
D)  continue producing the same level of output.

Exam 12: Firms in Perfectly Competitive Markets

In an increasing cost industry,an unexpected decrease in demand would lead to ____ costs and a ____ price in the long run?

If the market demand curve in a perfectly competitive industry shifts left,the demand curve for each existing firm will:

Which of the following is a characteristic of perfect competition?

Exhibit 12-9 Refer to Exhibit 12-9.This pair of graphs demonstrates the chain of events for a lawn care firm,beginning with an increase in the market demand for lawn care services.Which of the following statements is incorrect?

Exhibit 12-3 Refer to Exhibit 12-3.Total revenue for the firm in Graph C equals:

A firm in a perfectly competitive industry will expand output as long as:

William is a wheat farmer and wheat sells in a perfectly competitive market,with an equilibrium price of $5 per bushel.Its marginal revenue:

A perfectly competitive firm is a:

Suppose losses cause industry Z to contract,and as a result,the prices of inputs used intensively in the industry's production process fall.We know,as a result,that industry Z is:

In the short run,if a perfectly competitive firm produced at the quantity of productive efficiency,would it generate the highest profit level possible? Why or why not?

In long-run equilibrium,a perfectly competitive firms produces at the output level at which:

If perfectly competitive industry B is currently realizing economic profits,we would expect that:

For a perfectly competitive firm,average revenue is:

Why can't a firm in a perfectly competitive industry charge a price above the market-clearing price?

The demand curve faced by a perfectly competitive firm is vertical.

What is the maximum amount of profit the perfectly competitive firm depicted below could earn in the short run?

Which of the following statements is not characteristic of a perfectly competitive industry in long-run equilibrium?

The market demand curve in a perfectly competitive industry is horizontal,while the demand curve faced by an individual perfectly competitive firm is downward sloping.

If the typical firm in a perfectly competitive market was depicted in the graph below,what would be most likely to occur?

Exhibit 12-3 Refer to Exhibit 12-3.If the market price decreased to $4.70 in Graph B,this firm should:

The Role and Method of Economics

Economics: Eight Powerful Ideas

Scarcity, Trade-Offs, and Production Possibilities

Demand, Supply, and Market Equilibrium

Markets in Motion and Price Controls

Elasticities

Market Efficiency and Welfare

Market Failure

Public Finance and Public Choice

Consumer Choice Theory

The Firm: Production and Costs

Monopoly and Antitrust

Monopolistic Competition and Product Differentiation

Oligopoly and Strategic Behavior

The Markets for Labor, Capital, and Land

Income, Poverty, and Health Care

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Measuring Economic Performance

Economic Growth in the Global Economy

Financial Markets, Saving, and Investment

Aggregate Demand and Aggregate Supply

The Aggregate Expenditure Model

Monetary Institutions

The Federal Reserve System and Monetary Policy

Issues in Macroeconomic Theory and Policy

International Trade

International Finance

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In an increasing cost industry,an unexpected decrease in demand would lead to costs and a price in the long run?